6 Ways to Utilize Commercial Funding

Healthy financial flow is the engine powering small business success; you can’t overestimate the value of capital resources. From founders’ investments to peer-to-peer finance opportunities, and everything in between, small businesses rely on various forms of funding to grease the wheels of commercial growth. Among the resources available to entrepreneurs, traditional bank loans and access to alternative funding round-out a diverse array of commercial capital opportunities.

Access to commercial financing is a key concern for startups and established businesses requiring working capital. But apt financial management doesn’t end there; securing funds is only the beginning. Wisely spending the money, for the greatest possible positive effect, is just as important as choosing the right financial products to advance your professional interests.

Prudent Spending Practices

Bootstrapping is a viable funding solution for some businesses. If startup costs are relatively low and you’ve saved a substantial sum of money for entrepreneurial endeavors, a self-funded small business may be within reach. For many established and emerging entrepreneurs, however, paying out of pocket is not a realistic approach.

Rather than only relying upon personal savings for capital investment and cash flow needs, most small business operators also seek outside help, utilizing loans and other credit resources beyond founders’ investments. Whether the money is sourced from angel investors, conventional lenders, or alternative funding sources, putting the proceeds to good use can make the difference between a short-lived venture and lasting prosperity.

However you choose to fund your businesses, financial temptation can undermine prudent spending. When allocating funds, establishing ordered priorities and sticking to the plan can help you maintain fiscal discipline, preventing ill-advised outflow. For the best results managing capital investment and working cash flow, effective entrepreneurs often dedicate funding resources to the fundamentals included on this list of six ways to spend commercial capital.

1. Human Resources

Competent employees propel small business; human resources are a good investment. In practice, however, hiring and nurturing top talent exacts a price. When growth calls for workforce expansion, commercial funding facilitates additional employees and accommodates short-term payroll expense.

Spending smart on human resources may enable you to expand production capacity or to address more of your business needs in-house. The resulting production increases and operational efficiencies not only expand revenue opportunities, but the moves also support cost-cutting and boost profitability potential.  

Whether you hire help managing inventory or doing your business bookkeeping, delegating may be less of a luxury than you think. The essential practice enables you to focus on big-picture planning and growth strategies, rather than getting bogged down with day-to-day operational details.

2. Inventory

Managing inventory calls for substantial cash flow, particularly for seasonal businesses, with irregular sales cycles. As a result, buying inventory is among the most common uses for small business loans. Maintaining adequate inventory levels can be challenging for new businesses and those experiencing unusual demand for products. Access to commercial funding enables you to respond quickly when inventory needs change.

For accounting purposes, inventory represents goods owned by a company that will be used within a year’s time. Inventory takes three forms, depending upon the industry and the nature of the business.

• Raw Materials – Manufacturing materials such as steel and other commodities fall in to this category. Raw material inventory levels reflect the amount of goods needed to complete manufacturing processes during a given time period.
• Work in Progress – Work in progress captures inventory that has been subject to some aspects of the manufacturing process, but are not yet finished goods, ready for market.
• Finished Goods – Retailers typically don’t stockpile raw materials or maintain works in progress; finished goods are their specialty. Small business loans are commonly used to keep shelves stocked, especially during the fourth quarter holiday sales blitz, when retail inventories are padded for the seasonal rush to buy.

3. Technology

Making the most of advancing technology gives your business a competitive leg-up in the marketplace. Whether you’re an independent retail entrepreneur or a startup innovator, technology plays a vital role supporting your commercial endeavors. Access to small business capital enables you to invest in technology that maximizes operational efficiency and keeps your business on the cutting edge.

Technology-inspired ventures have tech requirements above and beyond businesses operating outside the niche. However, software, hardware, and technology infrastructure are essential features for most modern business owners, allowing forward-looking operators to keep pace in an increasingly digital world. In addition to computing and communications upgrades, production and automation technology updates are also frequently funded with small business loans, facilitating business expansion and manufacturing efficiency.

4. Website

Not only do you need a website conveying important information about your business, such as locations, hours of operation, and specialties, but the site must also be easily navigable and optimized for search engines. These basic features and functions are only the beginning for web-based businesses, which must also elevate their online presence to attract customers, reinforce customer relationships, and accommodate ecommerce.

Each business brings distinct requirements to the web, calling for unique solutions. Spending for web development spans a range from hundreds of dollars for a simple site to tens of thousands for a functional website with bells and whistles. Three key areas to consider when designing and developing your website include:

• Infrastructure – Infrastructure provides the framework behind your build, including software, hosting, and domain considerations.
• Functionality – Custom websites incorporate specific functions that support your business needs. A shopping cart, for example, facilitates online sales for retailers.
• Design – Design and functionality are the interactive elements of your website, responsible for creating an online user experience reflecting your goals.

5. Expansion

Small business entrepreneurs commonly seek commercial capital to fund expansion. Facilitating growth and development incurs many of the same expenses facing startups. Small business funding resources can be used to hire additional personal for your sales team, expand hours of production, and otherwise expand profitability potential. The money may also be allocated to inventory expansion or developing new products, in the case of manufacturing businesses.

Commercial funding further supports expansion with money for adding locations, conducting facilities upgrades, and making capital equipment investments.

6. Consulting

Tapping industry expertise can help you fine-tune your professional approach. Consultants bring experience and understanding you may not have in-house – particularly if your venture is just getting off the ground. In one example of consulting benefits, investing in sales training may help your team excel, increasing revenue. And when technology upgrades are in order, software experts can help you select and install appropriate updates, as well as training users within your organization.

Access to commercial funding is a vital resource for established businesses and startups alike. Among its many functions, business capital can help you hire staff, expand production, enhance your presence on the web, and keep inventory levels up to par. When it’s time to invest in your business, revenue-based funding opportunities and other commercial capital resources can help you achieve your goals.